Ben Wright, CEO of global expansion solutions provider Velocity Global, explores the impact of Covid-19 on businesses’ ambitions for international growth and how firms continue to leverage opportunities overseas.
As the year began, businesses in the UK set out their strategies for growth in new markets. Then, the Covid-19 pandemic swept populations and economies across the globe.
Many firms across the world closed their doors completely during lockdowns, while others partially furloughed workforces as the demand for their products and services dropped temporarily.
One might assume the slowdown would pour cold water on the international growth aspirations of UK businesses. While Covid-19 caused UK businesses to collectively hold their breath, ambitions for global expansion are returning.
The big pause
Europe and Asia represent two of the top-three most-desired expansion locations in Velocity Global’s survey of 500 UK tech businesses, published just before the Covid-19 outbreak in the State of Global Expansion 2020™ report. Both were acutely affected by the pandemic, yet both remain key targets for business expansion.
Based on interactions with hundreds of companies that employ thousands of employees around the world, as initial signs of recovery emerged in Asia, the number of companies expanding into APAC more than doubled in March when compared to the first two months of the year. This followed a fall of a third (32 percent) during the peak of the pandemic in Asia in January and February, compared to the previous six-month average.
Europe, the epicentre of the outbreak for most of March, garnered consistent interest across the first quarter of 2020. Velocity Global received more enquiries from businesses planning a move into the continent in this period than in any other quarter over the last five years.
Businesses adopted a wait-and-be-ready approach to pandemic recovery, preparing to move quickly when the time is right.
Changing how we think about expansion
Covid-19 introduced an additional layer of complexity for global expansion as many governments stopped approving legal entity applications while their countries are in lockdown. Firms hoping to access those markets must explore different and more flexible approaches as a result.
An Employer of Record, or International Professional Employer Organisation (PEO), represents one modern alternative that is gaining momentum in a new normal of uncertainty. This approach enables businesses to employ people and deliver services to clients all over the world without having to establish legal foreign entities in those countries.
The International PEO hires staff on behalf of the company through an existing global infrastructure in the desired country and manages administrative aspects such as payroll and benefits. The firm has the same day-to-day relationship with its international workers as it would with its domestic employees. Additionally, the International PEO navigates the regulations and compliance procedures of the foreign country.
We are living in a “new normal,” in which flexibility is paramount. Hiring through an existing Employer of Record network means a firm can have a presence and be up and running in a new location much faster than setting up a legal entity. For example, a company wanting to maximize developer talent in tech-savvy Singapore turns to an International PEO to set up a team within a matter of days. That same firm can also pivot if conditions change, without the sunk cost setting up an entity and the additional costs of tearing it down when exiting the country.
Velocity Global’s survey of UK tech firms identified reaching new customers, creating scale and efficiency, and accessing skilled workers overseas as the top reasons for expanding into new markets.
Utilizing an International PEO bypasses traditional delays, empowering businesses to test the waters in a country or region, build a customer base, and tap into the local pool of skills, staying ahead of competition and accelerating expansion.
Global agility is now a necessary attribute to pursue these business objectives in a world changed by Covid-19.